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AD-AS Model: Equilibrium in the Short Run and Long Run definitions

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  • Aggregate Demand
    Represents the total spending on goods and services at various price levels within an economy.
  • Short-Run Aggregate Supply
    Shows the relationship between production and price level when some input prices are fixed.
  • Long-Run Aggregate Supply
    Depicts the economy's maximum sustainable output when all prices are flexible.
  • Equilibrium Price Level
    The point where the market's aggregate demand and aggregate supply curves intersect, setting overall prices.
  • Real GDP
    Measures the value of all goods and services produced, adjusted for inflation, reflecting true economic output.
  • Long-Run Equilibrium
    Occurs where aggregate demand, short-run aggregate supply, and long-run aggregate supply all meet.
  • Short-Run Equilibrium
    The intersection of aggregate demand and short-run aggregate supply, determining temporary output and prices.
  • Economic Fluctuations
    Variations in output and price level caused by shifts in aggregate demand or supply.
  • Market-Clearing Price
    The price at which the quantity demanded equals the quantity supplied in the aggregate market.
  • Price Level
    Represents the average of current prices across the entire spectrum of goods and services in the economy.
  • Output
    The total amount of goods and services produced within an economy, often measured by real GDP.
  • Inflation
    A sustained increase in the general price level, often resulting from shifts in aggregate demand or supply.
  • Graph
    A visual representation used to illustrate the relationships between aggregate demand, supply, and equilibrium.
  • Intersection
    The point where two or more curves meet, indicating equilibrium in the AD-AS model.